Health Care Reform Revisited – The Elephant in the Room: Part 1

First published 5/17/11 on the Institute for Health and Productivity Blog

I had the pleasure week-before-last of attending one of my favorite health care events – the CAPG 2011 Annual Conference in Palm Desert, California (just a few hours’ drive away from IHPM’s headquarters in Scottsdale, Arizona).

CAPG stands for the California Association of Physician Groups, considered by many the most significant physician-based organization in the country and IHPM’s partner in a new initiative aimed at harnessing the power of the nation’s most advanced medical groups to proven worksite health improvement programs to produce even better outcomes in the working population.

My favorite session each year at the CAPG conference is the Healthcare Panel that kicks off the second day, featuring – this year – California health care CEOs from the nationally recognized Hill Physicians Medical Group, from Sutter Health, from Health Net, and from the Pacific Business Group on Health. And while California is, indeed, a health care world of its own with many working functional equivalents of the Accountable Care Organizations (ACOs) that scarcely yet exist elsewhere, I was fascinated by the way that obviously intelligent industry leaders could yet be myopic when it comes to seeing the bigger picture of which California still is just a part – with one exception.

For while the others were talking about how they expected to thrive – or at least survive – in the brave new world of accountability that ACOs signify and they already personify, there was one definite “outlier” who shook his head and wondered how they could miss the “elephant in the room” that threatens to trample all the good intentions of moving the health care system to “accountability” and “quality” and “value.”

This elephant – visible to economists if not to the policy wonks responsible for designing such schemes – is national health care “reform” with its inevitable combined impact of (1) simultaneously increasing demand for health care services by expanding coverage without increasing the supply of services, (2) adding yet more costs to coverage through insurance mandates such as guaranteed issue, and (3) reducing payments to providers of services.

The “outlier” on the panel who stepped back and saw the elephant was Jay Gellert, the CEO of Health Net. While not exactly accusing his fellow panelists of fiddling while Rome burned, he wondered aloud how they could be focused so intently on improving their own “medical homes” while a seismic shock was building that would unleash a tsunami of uncovered costs and inadequate services to wash away all their homes no matter how well built. This inability to see the bigger picture because of living too deep inside it results in confusing the smaller financial factors involved in running a business with the much larger economic forces that shape the environment for all business.

As the Massachusetts experience with Romney Care is proving for the nation – with costs climbing faster since “reform” and Romney’s successor now seeking to create a “central board” of political appointees to set payment rates for medical services — the only way to afford a government guarantee of everyone’s medical bills is through political control of medical spending and, ultimately, decision making. The California medical groups and hospitals may, collectively, be the very model of a modern ACO, but this will not save them from the impersonal forces of macro-economics or the distortions created by inevitably doomed political attempts to avoid those forces – like King Canute commanding the waves not to crash on the shore.

(Part II will consider how the “reform” debate is hastening the irrelevance of health care “policy” to employers finding their own ways to improve the health – and performance – of their work force).

One thought on “Health Care Reform Revisited – The Elephant in the Room: Part 1”

Massachusetts universal reform has not had any significant impact on the cost of care in the Commonwealth. Costs here were high before reform and all parties acknowledged when reform was enacted and implemented the phase two would be addressing cost. Governor Patrick, the legislature and the health care community are now in midst of doing that. By the way, the number of day to schedule a visit with a primary care physician (internist) declined last year as we reached 98.2% of Massachusetts residents covered.